Legislators have criticized use of public funds in research and development and resolved to regulate use of funds at key points to improve innovation.
Members of the Standing Committee of the National People's Congress (NPC) were told by Finance Minister Lou Jiwei that despite pouring money into the sector, reforms were needed. Basic research relies heavily on financial support from central government rather than local governments or enterprises, and the portion of research and development expenditure that goes to basic research is too low.
He also noted funding scandals due to poor monitoring and supervision had seriously affected the image of scientific research.
Lou's remarks came after Wan Gang, Minister of Science and Technology, angry at misuse of R&D funds, criticized bad practice earlier this month.
Recent audits showed research funds being used for conferences, overseas visits, renovations, benefits for researchers, and other unexpected ends.
China has poured funds into R&D to build an innovation economy. Expenditure in the sector increased from 169 billion yuan in 2006 to 560 billion yuan in 2012. Total expenditure on science and technology in the last seven years totals 2.42 trillion yuan.
Spending reached one trillion yuan (164.1 billion U.S. dollars) in 2012, about 1.98 percent of gross domestic product, third in the world. Not all of that money was spent on desirable projects. According to the Chinese Association of Science and Technology, only 40 percent of funds make it to their intended projects. Most are simply wasted.
Auditors found that from 2010 to 2012, the Ministry of Communications distributed 186 million yuan from a total of 1.6 billion yuan of research funds on salaries and subsidies for staff, while two colleges in southwestern province of Guizhou spent 17.4 million yuan on housing projects.
Chen Ailin, a deputy to the NPC, said researchers are often badly paid, so institutions use state funds to improve conditions for the staff.
Wu Xiaoling, a member of the NPC Standing Committee and former vice governor of the central bank, calls for improving benefits for scientists working on basic research, the most important for R&D, but much less profitable than applied research.
Funds for basic research are limited, according to the NPC, only about 5 percent. In the U.S. the number is almost 20 percent, in the United Kingdom 11 percent and 18 percent in Russia.
"Basic research is the fundamental way to improve innovation," said Yao Jiannian, a member of the NPC Standing Committee, adding that wide gap still exists between China and developed countries in science and technology.
The Chinese leadership stresses the importance of innovation. At the 18th National Congress in November 2012, the Communist Party of China (CPC) put forward a strategy for innovation-driven development, stressing the importance of scientific innovation in improving productivity and overall national strength.
On Sept. 30, members of the Political Bureau of the CPC Central Committee visited Zhongguancun in northwestern Beijing, known as China's Silicon Valley. It was a sign that the country yearns for advanced science and technology power.
Chen Changzhi, vice chairman of the NPC Standing Committee, said evaluation could not focus on the quantity of theses published or awards -- Chinese scientists have numerous theses published in reputable academic journals -- but innovation is still lacking.
Wu said the current system of funding for R&D does not make enterprises the major player. She suggests that reform should clearly define relations between government and market, and establish a credit system for enterprises.
"The fundamental way to better finance R&D is to accelerate the transformation of government functions, and improve the system administrating science and technology," said Lyu Zushan, a member of the NPC Standing Committee.
