Universities also received the first income from the government's HK$18 billion research endowment fund set up last year, with HK$675 million going towards hundreds of research projects.

A spokesman for the University Grants Committee said it hoped the total projected annual income of about HK$900 million from the fund would be available in the next academic year.

Total competitive research funding rose 4 per cent this year after the investment income from the fund was used to replace most public funding for research grants, with the government contributing HK$100 million.

Professor Roland Chin Tai-hong, the chairman of the Research Grants Council, said: 'We expect there will be a further increase of about 2.5 per cent next year. The increase in resources means more research opportunities for postgraduate students in Hong Kong universities.'

Income from HK$4 billion of the fund is being set aside to support a new theme-based research scheme that is due to provide HK$200 million a year in targeted fields from September next year.

There are three themes: promoting good health, developing a sustainable environment and enhancing Hong Kong's strategic position as a regional and international business centre. Each theme is divided into several 'grand challenge topics', which were picked after academics submitted more than 300 'white papers' outlining their suggestions to the grants council.

Topics for the health theme include infectious diseases and genomic medicine, while the business themes include Hong Kong's future as an international financial centre and enhancing entrepreneurship and business conditions for start-ups. Those selected for the environmental theme include some of the city's biggest challenges: water pollution and water treatment, creating a sustainable built environment and air quality.

'Local academics have been responding enthusiastically to the three themes and 11 selected topics,' Chin said. 'The new funding stream will mean greater opportunities for students to undertake research of strategic importance to the territory's long-term development in fields where the research community has particular strengths.

'The demand for more academic staff in connection with the implementation of four-year degrees from 2012 also means that there will be more opportunities for students who intend to pursue academic careers in Hong Kong, irrespective of whether they received their postgraduate education in Hong Kong or overseas.'

On campus, the extra support is translating into a surge in research activity and enrolments. At the University of Hong Kong, the number of MPhil and PhD students rose 10 per cent to 2,601 in 2009-10, with the biggest increases seen in medicine, engineering and science. There was a similar rise in the first six weeks of this academic year.

HKU pro-vice-chancellor Professor Paul Tam Kwong-hang said: 'Everything is moving ahead at a great pace. It really is the best time ever to get involved in research in Hong Kong. This is still a developing field and the people who arrive first obviously have an advantage.

'We expect to offer more postgraduate research places next year because of the theme-based scheme, and we are going to see a significant number of large interdisciplinary research programmes in the three themes coming on stream.'

Tam said HKU was also reviewing its postgraduate research education to make it more student-centred, provide more taught courses and prepare students for leadership roles in society.

The graduate school was planning to boost the number of taught courses in areas such as thesis writing and subject-specific topics. Advanced English-language courses were already being offered and 'an enhanced core programme for responsible research conduct' had been brought in to foster research integrity among students.

Tutors from Imperial College in London were flown in last year to offer an intensive residential course in transferable skills such as teamwork, leadership and communication. The programme was so popular that HKU was now training its own academics to lead the programme.

'We have come up with an explicit mission that the purpose of research postgraduate education at HKU is to nurture the next generation of researchers,' Tam said. 'And hopefully by the time the students graduate, they will also be well equipped for a career in the knowledge-based economy. They could become top civil servants running a ministry of innovation and technology or leaders of industry.'

The number of taught master's degree places funded by the grants committee has dropped from 2,574 full-time and 8,100 part-time in 2002-03 to 1,192 full-time and 2,419 part-time this year. But a flourishing market for self-financing taught master's has grown in their place, with universities switching courses to self-financing mode and many new taught programmes being set up.

Mixed economic signals combined with a larger number of first-degree graduates on the job market have fuelled demand for postgraduate qualifications, as employers raise the entry bar for posts and employees seek to differentiate themselves from the crowd.

At Chinese University, applications to taught programmes rose 24.5 per cent this year to 17,702, while the number of students admitted grew more than 5 per cent to 8,968.

The university opened seven new taught programmes, of which five were health-related subjects, including MSc in mental health and advanced emergency nursing practice. Four more new health programmes are planned for next year.

Hundreds of postgraduate qualifications are offered in Hong Kong by foreign universities, often in tandem with local universities, and a registration requirement backed with quality checks has led to improved standards over recent years.

And as efforts proceed to develop new private universities in Hong Kong, the city gained its first stand-alone campus of a private foreign university this year. The US Savannah College of Art and Design opened its doors at the former North Kowloon Magistracy building in September.