As an alternate member of the Chinese Communist Party's central committee, Min Weifang is one of the 371 most powerful politicians in the country. So it carries some weight when Min, former chair of council at Peking University, calls for greater academic freedom in some of the nation's universities.

Premier Wen Jiabao announced last month that China will this year finally meet its long-held aspiration to devote 4 per cent of its gross domestic product to education spending, against an average spend by countries of the Organisation for Economic Cooperation and Development of 5.9 per cent in 2008. This represents a victory for the country's educators after nearly three decades of effort.

Yet even as ambitious top-tier universities close the gap with leading institutions abroad, senior academics have warned that the poor quality of China's lowest-tier institutions and continuing limitations on academic freedom are holding back the sector's ability to nurture creativity and innovation.

And international observers have noted the stark imbalance in state investment between elite and regional universities.

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The 4 per cent of GDP figure "is the number they [the government] have been trying to meet for 30 years. It indeed is a remarkable and important milestone," says Min, who completed postgraduate degrees in education and sociology at Stanford University and is currently director of Peking's Institute of Economics of Education, as well as president of the Peking University Education Foundation.

"[At Peking] we are coming closer and closer. We are now within the top 50. Probably in five years we will be in the top 30 - I don't know. But personally speaking, I think we still have a long way to go to catch up with the very top universities, like Cambridge, Oxford, Harvard, Stanford."

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Min praises the country's education funding strategy, which focuses millions of yuan on China's top universities, often at the expense of poor regional schools.

But he acknowledges that there is a long way to go for elite universities as well as for regional institutions, which, he suggests, have suffered from overzealous checks on academic freedoms and a lack of funding.

Nevertheless, "a country like China cannot thinly spread out everything. Then you can do nothing," Min says, defending Peking and other top-tier institutions, including nearby Tsinghua University, as havens of comparative autonomy in a country where academics can be demoted, transferred to regional institutions, fired or detained for becoming too involved in politically sensitive areas.

"At Peking University, there is a good tradition of more academic freedom, more academics active in affairs on campus and more autonomy for faculty in terms of their teaching and research. As long as they observe the constitution and higher education law, we don't interfere with their academic research and we give them more academic autonomy," he says.

"Some universities in China still have too tight administrative control over academic affairs. I don't think it's a good way of running a university. If you want to become academically prosperous, [staff] need academic freedom so that you can really have innovation, you can have creativity. Intellectual independence - that's the basic foundation for innovation."

In 2010, China spent 3.66 per cent of GDP, or about 1.47 trillion yuan (?147 billion), on education. If that rises to 4 per cent this year, and if growth in GDP hits the government target of 7.5 per cent, education funding in 2012 could reach more than 2 trillion yuan.

The increase would still leave China lagging behind the US and the UK (which contributed 7.2 and 5.7 per cent of GDP, respectively, to education in 2008, according to the OECD), but ahead of India (3.1 per cent in 2006, according to the Chinese government).

Well-funded elite pull ahead

Although there is hope that some of this extra money will go to addressing inequalities at regional universities, much of it seems likely to remain focused on the nation's elite. For nearly two decades China has been working to establish a group of world-class institutions, first with the "211" funding project for 100 universities established in 1994, and then in 1998 the more intensive "985" project, aimed at creating a sort of Chinese Ivy League, a group that now includes more than 30 institutions.

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"It's just like sports in China," says Zhu Dake, a professor at the Institute of Cultural Criticism at Tongji University in Shanghai.

"China gives its athletes intensive training and invests huge amounts of money in athletes, and thus they get good results in world competitions. The funding that Peking University and Tsinghua get far exceeds that of other universities. It's a spoon-feeding style. With that funding and their own reputation, they can recruit talented teachers."

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Peking ranked 49th in the ³ÉÈËVRÊÓƵ World University Rankings 2011-12 and 38th in the reputation ranking component of those league tables, which was published separately earlier this year. Tsinghua was rated 71st overall and 30th in the World Reputation Rankings 2012. The two universities are attracting both foreign academics and Chinese scholars working abroad with the promise of research funds and prestigious titles.

Peking University's wealthy alumni at home and abroad have made large contributions that have helped to swell the coffers of a recently established university endowment fund - a relatively novel idea in a country still new to investing - and have bankrolled several building projects. Outside Min's office the whirring of heavy machinery can be heard as a new student centre and a new centre for Chinese-language study take shape.

Regional institutions lag behind

However, dynamic growth and change of this kind is confined almost exclusively to the country's leading institutions.

"China is an extreme case of inequality," says Philip Altbach, director of the Center for International ³ÉÈËVRÊÓƵ at Boston College, who recently completed a comparative study of academic salaries around the world.

China, where the average academic salary is just $720 (?454) per month, was near the bottom of a table of 28 countries, but it also had the greatest inequality between the salaries at elite institutions and those at the bottom tier, according to Altbach. "The difference between the really top-end universities and the rest is quite dramatic, more than you will find in most of Europe or the US," he says.

"The bottom of the system is really pretty poor. It has expanded overly quickly and will continue to expand overly quickly, and that has had its impact on quality."

Perhaps the greatest challenge the sector faces, however, is finding a way to accommodate the huge demand for higher education. The estimated 29 million Chinese students who are now in higher education make up just 30 per cent of their cohort, the rest having been denied a place by a poor performance on the gruelling national entrance exam, the gao kao.

"Every country's education fund is insufficient compared to the need in education," says Yuan Liansheng, a professor of accounting at Beijing Normal University who specialises in education funding.

"Even in developed countries such as the US and the UK, whose education funding far surpasses that of China, the education fund is still not enough. China is no different; the education fund still won't be enough even when it reaches 4 per cent of GDP.

"Teachers' wages in most of China's rural areas are still low, and the education conditions are still poor. In cities, we've got millions of migrant workers' children who cannot go to public school to receive free education. Those are all signs of insufficiency in public education funding."

Those who do not gain entrance to prestigious universities or even lower-tier regional ones either pay to attend one of approximately 1,000 private institutions, many of which are substandard, or are denied access to higher education completely. Although the government has begun to recognise the so-called min-ban, or people-run, private universities, and have granted the best of them degree-awarding capability, most of them remain institutions of last resort.

"Chinese culture attaches high priority and importance to education. Even in the poorest families, the parents' first wish is to send their child to university," Min says.

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"Given the current system and structure, simply by pouring money into it you cannot solve all the problems. We need to deepen the reform - administrative reform, personnel reform, financial reform and even the supervisory reform...It is a process."