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(Graphics: GT)

(Grpphics:GT)

Shenzhen Huawei Investment & Holding Co, the parent of technology giant Huawei, unseated e-commerce giant Alibaba Group as the top innovative domestic company in the Chinese mainland, according to the findings of an annual survey released on Tuesday by global consulting firm Strategy&.

Tencent Holdings, the third most innovative domestic company on last year's ranking, moved up one spot on the 2014 list, while Alibaba was ranked No.3 this year, ceding its innovation crown to last year's runner-up, according to a report based on the survey.

Nearly 400 executives from both Chinese and foreign companies joined the survey, which was conducted this spring and summer.

"Huawei is probably seen as the Chinese company which most embodies innovation - not just in [the mainland] but also globally," Steven Veldhoen, a Beijing-based partner at the consulting firm, told the Global Times after the release of the survey, referring to the rankings based on the input of business executives.

Smartphone vendors Beijing Xiaomi Technology Co, Meizu Technology Co, and electric-car maker BYD Co are new to the list of domestic innovators, among which, eight of the top 10 firms are in the high-tech or Internet arena, the report said, attributing the phenomenon in part to the highly open and intensely competitive nature of the sectors in the mainland market.

Chinese companies, particularly those expanding overseas, are increasingly turning to innovation as a significant driver of business growth.

The survey found that innovation is the first priority for 42 percent of domestic companies, compared to 21 percent of multinational firms.

In a sign that domestic companies are gaining traction in innovation, 65 percent of multinational respondents said that their companies are confronted with Chinese competitors that are just as or even more innovative, the survey results showed.

China is attaching greater importance to innovation in its reform-bound economy.

Speaking at the opening ceremony of the Summer Davos Forum in Tianjin on September 10, Premier Li Keqiang said the Chinese economy has maintained steady and sound growth in recent years, owing to reform and innovation.

"China's innovation involves not only technology but more of institution, management and growth models," said the premier, pledging stepped-up reforms to remove restraints on innovation by individuals and companies.

The survey also revealed concerns over the lack of innovation in the country's State sector.

"State-owned enterprises (SOEs) are, on the whole, seen as lacking impetus in innovating their products and services," Wang Jun, a research fellow at the China Center for International Economic Exchanges, a Beijing-based think tank, told the Global Times on Tuesday.

The monopoly positions of most SOEs dampen their zeal for innovation to achieve higher earnings, Wang said, noting that an ineffective incentive mechanism for innovation for SOE management also works as a drag on innovation in the State sector.

But with the deepening of SOE reform, which includes launch of pilot programs on mixed ownership, the level of innovation in SOEs is expected to rise, he believes.

A separate list that names the top 10 innovative foreign companies in the mainland market was also announced on Tuesday, placing Apple Inc, Samsung Electronics and Volkswagen Group China among the top three.

It is hardly a surprise that Apple tops the list, given "the ubiquity of Apple products and services, and its imitators," remarked Veldhoen.