Contracted foreign investment, an indicator of future trends, rose 59.6 percent year-on-year January to March to US$22.98 billion, the ministry said.

The strong growth has continued from last year and is expected to last for quite some time, said analysts.

Despite dramatic cuts in the total amount of global cross-border investment, foreign capital inflow in China has started to rise rapidly since last year.

China surpassed the United States as the world's largest foreign investment receiver last year, with an inflow of US$52.7 billion.

Low manufacturing costs are a major attraction for foreign investors. Harsher competition due to contracting international demand and the depressed global economy last year sharpened China's advantage, said Long Guoqiang, a researcher at the Development Research Centre under the State Council.

China's entry to the World Trade Organization (WTO) and the resulting improvements in the transparency and stability of Chinese laws, rules and policies have played a pivotal role in boosting foreign investors' confidence in the market, he said.

But commerce ministry officials in charge of foreign investments said it was hard to predict how long the honeymoon between China and foreign investors was going to last.

China WTO Report 2003, an annual publication compiled by the China Society for WTO Studies, urged the government to improve its laws, rules and policies, especially the industry directory for foreign direct investments, to iron out problems for foreign investments.

It said the government should also pay much attention to the co-ordination between investment and trade policies, reform and adjust its means of managing foreign investments, diversify foreign entry modes and encourage foreign participation in restructuring State enterprises as well as the development of China's central and western regions.

China has issued new temporary rules for mergers and acquisitions (M&As) between foreign and Chinese companies in the latest step to increase inflows of foreign investment.

A number of conditions were also set with the aim of protecting domestic industry from foreign players.

(China Daily April 15, 2003)