The Lishui Economic and Technological Development Zone – located in Lishui city in East China's Zhejiang province – has seen more and more of its companies increase their investment in new product research and development in recent years.

From January to March this year, businesses resident in the zone poured in a total of 170 million yuan ($26.39 million) into R&D, a 68.6 percent year-on-year increase that set a quarterly record.

One of them – Zhejiang Benefit Pharmaceutical Co Ltd – has consistently focused on the research and industrialization of Chinese medicine formula granules, according to Guo Lianping, its deputy general manager.

"Our company's research and industrialization of the traditional medicine of the She ethnic group is one of the major R&D projects in Lishui," Guo said.

"The project's total investment in R&D was 5 million yuan and is expected to complete its acceptance inspection by the end of this year."

As the leader in the zone's rolling components industry, Lishui Jiexiang Technology Co Ltd has placed great importance on R&D of its production equipment.

Pan Jianxin, deputy general manager, said the company invested 4.77 million yuan in R&D in Q1, up 379.9 percent year-on-year.

To improve overall R&D and innovation capacity, the municipal government's strong support is also widely regarded an essential factor.

"We have been strengthening our door-to-door services, to provide policy interpretation and to guide our companies on using R&D costs reasonably, encouraging them to apply for key R&D projects," said Wu Shujing, a zone official.

This year, a negative incentive mechanism for R&D investment will be established. Under it,  expenditure on the area will be a key assessment factor in the zone's evaluation of its companies. This is expected to encourage businesses with minimal levels of investment to prioritize scientific and technological R&D, according to Shu.