CHINA is becoming more important as a global source of innovation although local research facilities still face challenges, industry watchers said yesterday.

"Global research and development centers are shifting towards China," Max von Zedtwitz, who represents the GLORAD Research Center for Global R&D Management, told an innovation forum held by the American Chamber of Commerce in Shanghai.

China is now home to 1,200 foreign R&D centers, according to GLORAD.

"China's research and development now resembles what we see in the West," Zedtwitz said. "The strategy of successful firms has changed from fast followers to leaders."

China's R&D percentage of GDP grew from 0.75 percent in 1985 to 1.4 percent in 2008. It is forecast to hit 2.5 percent in 2020.

But industry insiders still see drawbacks. Li Gong, chief executive of Mozilla Online Ltd, said many researchers are underutilized in China.