Should continue PhD or leave after 2 years and no progress? I need your suggestion on my situation. 

I am a second year PhD student in Chemical Engineering in Asian country. 
My situation:

When I was admitted to PhD program, I was not given any project and my supervisors suggested me to choose. So, I choose X project for which we had no fundings but one person was working on it. After completing my coursework in first year, I started working on my project but after few months I realized it is not progressing well so I talked to my supervisors and he advised me to  continue to work on it. However, after almost a year also I cannot find that the project is progressing. 

Thus I need suggestions on how should I proceed from now on as the projects in our group are very challenging to start over again and complete in another 2 year and in our university we dont get fundings after 4 year of PhD . Indeed,we should pay tuition fees. 

Will it be a good idea to leave this university and apply fresh in some other university?

I am afraid my supervisors will not agree to give me masters degree or transfer of candidature from PhD to masters by research. 

Please suggest me in this matter.
True answer: we do not know. It really comes down to the cause of the lack of progress, but from this distance, it is impossible to know the true cause. I would recommend speaking with a trusted advisor -- maybe your supervisor, or another professor that you trust.

Speculation: less than a year is a reasonably short time. Are you learning anything? My experience is that students spend the first year or so just learning the basics, so your advisor may be leaving you to your own devices for now. I would speak to older or former students who have also worked with your advisor to see what they think. In any case, I think a year is long enough for you to address this with your advisor. I would ask him for a time when you can block off 30 minutes for a formal meeting, rather than just dropping by his office, and candidly explain your concerns, and ask him what his plans are and when he sees you graduating. You may want to discuss the technical reasons for lack of progress, but make sure the conversation focuses on your pathway to graduation rather than just the technical difficulties you've faced.

More speculation: I would focus completely on making things work out at your current university, and not think about or mention transferring out. You may consider trying a different advisor if you think that is the problem, but do so ASAP. Leaving with a master's degree may be a good solution if you can arrange it, but (at least in my [Western] experience), it is pretty unusual to get a PhD after getting a master's from a different institution.