Mergers and takeovers of Chinese companies by foreign investors brought in actual investment of 1.4 billion U.S. dollars last year, up 49 percent from a year earlier but accounting for only two percent of the total foreign investment in use in 2006.

Greenfield investment, or new operations on a bare site, remained the dominant foreign investment, Sun Peng, deputy director of the Foreign Investment Department with the Ministry of Commerce, said on Friday at the 2007 International Business Group Annual Conference.

The government approved almost 1,300 foreign mergers and acquisitions (M&As) last year, up 25 percent from 2005, but most were non-state-owned enterprises, accounting for 62 percent of last year's total foreign contractual merger and acquisition investment of 4.8 billion U.S. dollars.

Foreign investment in manufacturing through mergers and acquisitions totaled 1.7 billion U.S. dollars, down 11 percent from a year earlier while that in infrastructure, wholesale and retail and services surged.

The acquiring companies came from 44 countries and regions, with the Virgin Islands taking the lead with a contractual investment of 1.19 billion U.S. dollars.

Hong Kong followed with 763 million U.S. dollars and was tailed by Mauritius (188 million U.S. dollars), Cayman Islands (111 million U.S. dollars) and the United States (92 million U.S. dollars).

Li Zhiqun who heads the MOC's Foreign Investment Department, said the mergers and acquisitions of local companies by foreign investors would help the country ascend the global industrial chain.

"As not many people are acquainted with the real situation of foreign mergers and acquisitions in China, it's reasonable to see some departments adopt a cautious approach in dealing with the issue," he said.

Foreign mergers and acquisitions have been controversial because of the concern that such deals might jeopardize China's industrial security.

Statistics from the United Nations Conference on Trade and Development showed China was the most popular developing country for overseas capital in 2006 and was fourth in the world in attracting foreign investment, after the United States, the United Kingdom and France.

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