"China is a market (for the software industry), but also a contributor to this market," said Microsoft's founder and chairman.

Zhang Yaqin, vice-president of the software giant in charge of its development activities in China, said a trend that is taking place is a shift from "made-in-China" to "innovated-in-China", as the country builds up its innovation efforts.

The world's fastest growing economy has set a goal to become an innovation-driven country by 2020.

"Innovation here is really at a rapid pace," said the founder of the most successful software firm in the world. "We want to do our part to help its innovation speed up."

Microsoft has established 20 innovation centers in cooperation with local universities and companies, and this year, it will add two more such centers.

On Thursday, Gates announced at a forum that Microsoft aimed to increase the number of innovation centers in the world from 110 to 200 by 2009.

In China, Microsoft has the most comprehensive research and development system outside its headquarters in Seattle, with 1,200 engineers.

On Friday, Gates also handed out awards to the regional winners of its Imagine Cup in China.

The contest is the world's largest computer science event among high school and university students with 100,000 participants, 7,000 in China. The Chinese team won the most medals in the global contest in 2005.

Nigel Burton, a Microsoft executive in charge of the event in China, said: "It is not important how many awards Chinese programmers get, but to show to 1 million students that they can be as good as people anywhere in the world."

When answering a question from a Chinese university student on what he would do again if he was 20 years old, the age he started Microsoft, Gates said his first choice would still be software as there were "way more opportunities in the future than the past".

He also accepted an offer to act as a honorary director on the board of Peking University on Friday, after receiving a honorary doctorate from Tsinghua University one day earlier.

Following Gates' speech at Peking University, a man jumped on stage and waved a piece of paper, saying "Free software. Open source."

Microsoft's software is mainly proprietary and is accused of being a monopoly in many markets. There is a growing demand for free software, like that of Linux.