Foreign direct investment (FDI) into China in the first two months of this year grew by nearly 8 per cent from a year ago, the Ministry of Commerce said yesterday. The figures show China continues to attract foreign investors.

FDI into China from January to February totalled US$8.6 billion, up 7.8 per cent year-on-year.

The ministry approved in the past two months 5,136 new foreign-invested enterprises, down by more than 5 per cent from one year ago.

Hong Kong, the British Virgin Islands and South Korea topped China's major foreign investment sources.

The ministry did not give figures for contracted investment, which are deals signed but not yet executed. This indicates the future investment trend.

China, despite its FDI fall in 2005, remains an ideal investment destination for overseas investors, said Gao Hong, a researcher with the Chinese Academy of Social Sciences.

China attracted US$60.3 billion in FDI last year, down slightly from the record of US$60.6 billion posted in 2004.

"We have noticed from the figures published that the average value of each single investment has increased," Gao said.

The ministry expects that FDI into China will remain at the level of last year.

But some experts think that total foreign investment into China might decline in the country's 11th Five-Year Plan (2006-10).

The National People's Congress, China's legislature, is expected to discuss a revision of the tax law that will introduce a unified business tax rate this year. Currently, foreign firms in China enjoy an income tax rate of 15 per cent, while domestic firms are taxed at 33 per cent.

China might see a decline in FDI in the years to come, but the country will play a more important role as an overseas investor, said Jiang Xiaojuan, a vice-director in the research office of the State Council.

Last year, China's outward investment surged to about US$6 billion from US$620 million in 2000.

In another development, China's trade surplus reportedly narrowed in February at the fastest pace since November 2004.

The surplus fell to US$2.45 billion from US$9.49 billion in January, news agency Reuters reported.

The decline in the country's trade surplus was attributed to an increase in imports.

Imports jumped in February by 30 per cent, while exports gained 22 per cent.

Last year, China's trade surplus amounted to a record of US$102 billion, causing deep concern with trade partners, in particularly the United States, which saw its trade deficit with China widen to a total of US$100 billion.

Some US politicians have even called for punitive tariffs on all China's exports to the United States.

(China Daily 03/14/2006 page9)