The Chinese government is to increase investment in the development of new drugs and encourage innovation in domestic pharmaceutical companies, an official said here Thursday.

Insufficient funding for research and development and a lack of innovation had hampered development of China's pharmaceutical industry, said Zhang Guobao, deputy director of the National Development and Reform Commission.

The commission has issued guidelines for the development of the medical and pharmaceutical industries, which set goals for the 11th five-year plan (2006-2010) period, said Zhang.

The goals are:

-- to industrialize production of 20 chemically-processed raw pharmaceuticals which have potential demand growth and high value added.

-- to try to secure five medical preparations listed in the United States and the European Union.

-- to develop and commercialize 20 to 30 standard, safe, effective and stable traditional Chinese medicines.

-- to industrialize production of 10 to 15 new drugs and vaccines for the treatment of severe and acute infectious diseases and serious chronic diseases, of which China owns the intellectual property rights.

-- to industrialize production of 10 to 20 varieties of digital and minor or non-invasive surgical equipment and materials.

The guideline requires at least five percent of income from pharmaceutical sales to be reinvested in research and development of medical equipment and major companies, and three percent to be spent on general producers.

The key areas for developing new drugs will be cancers, cardiovascular and cerebrovascular systems, viral infections, nervous and psychological systems, blood sugar reduction and senile illnesses.

In addition, the government will establish five large pharmaceutical groups with sales of at least five billion yuan (625 million U.S. dollars) each and 10 groups with sales of three billion yuan (375 million U.S. dollars) each by 2010.

It also aims to help five domestic companies to grow into international pharmaceutical producers.

Zhang said the guidelines were flexible. "The purpose is to release information and make suggestions to pharmaceutical companies and lead a healthy and ordered growth of the pharmaceutical market."