LONDON, Oct 3 (Reuters) - China aims to become a leading player in the fast-growing biotechnology sector by capitalising on research costs that are one fifth those of Europe or the United States, a top official said on Monday.

In the past, the country's drug industry has largely consisted of manufacturing cheap generics and producing traditional Chinese medicine.

Now the government is making biotechnology a priority, Professor Wang Hongguang, director general of the China National Center for Biotechnology Development, told a pharmaceutical conference in London.

The change is reflected in some startling figures. China already boasts more than 20 biotech parks dotted around the country and 500 biotech enterprises, he said.

Some 300 of these companies are focused on medicine, with the balance mainly targeting agriculture.

The Chinese government and local governments have both been active in supporting the sector, with total state funding last year reaching the equivalent of 270 million euros ($325 million).

The aim is to nurture home-grown enterprises and encourage inward investment from foreign companies.

It appears to be bearing fruit, with China currently having more than 150 experimental drugs in clinical trials and a handful of Chinese-developed biotech products already reaching the local market, including the world's first licensed gene therapy treatment.

PATENT CONCERNS
Western drug makers remain concerned at the country's reputation for weak patent protection, as highlighted by a decision of the State Intellectual Property Office in 2004 to overturn Pfizer Inc.'s (PFE.N: Quote, Profile, Research) Chinese patent on Viagra.

Overall, however, industry executives said enforcement of patents appeared to be improving, following China's accession to the World Trade Organisation.

Regulation of drug quality has also been tightened, with the establishment in 2003 of the State Food and Drug Administration, modelled on the U.S. FDA.

Wang predicted a coming boom for Chinese biotech, driven by low costs and the scale of the Chinese market.

"The cost of biomedical research in China is only about 20 percent of the cost in Western countries," he told the conference, which was organised by the Financial Times.

Those cost advantages range from cheaper lab work -- with Chinese salaries just 10 percent of those in the West -- to lower costs for pre-clinical tests on animals and clinical tests on humans.

As a result, Wang said, the basic cost of developing a drug in China could be as little as 5 million euros -- a fraction of the $800 million or more that multinational drug firms say it costs them to bring products to market in the West.

So far, there are only a handful of successful Chinese biotech companies, such as vaccine specialist Sinovac Biotech (SVA.A: Quote, Profile, Research) and SiBiono Gene Technology.

But the emergence of a pipeline of new drugs suggests more could follow, increasing the incentive for Western companies to tap into the country's science base.

Several major drug companies already have a research presence in the country, including Switzerland's Roche Holding AG (ROG.VX: Quote, Profile, Research) and Novo Nordisk (NOVOb.CO: Quote, Profile, Research), both of which have a strong focus in biotech.