Foreign direct investment (FDI) in China fell 1.52 percent year-on-year in the first nine months of 2006. Total investments slipped to US$42.59 billion, Ministry of Commerce spokesman Chong Quan told a press briefing yesterday.

But compared with August's year-on-year fall of 8.49 percent, the FDI in September rose 2.72 percent year-on-year to US$5.4 billion. This bucked a trend that started in May. Chong added that 3,794 foreign-funded firms were established last month, which was a fall of 0.94 percent year-on-year. Over the nine-month period, 30,021 such firms had been set up -- a drop of 6.83 percent year-on-year.

However, China continues to attract billions of dollars in FDI, stated the World Investment Report 2006 released yesterday by the UN Conference on Trade and Development. The report identifies China as the third largest FDI recipient in 2005 with its total of US$72.4 billion only being surpassed by the UK and the US.

China's FDI inflow to the non-financial sector saw a slight fall last year to US$60.3 billion, said the report. But FDI within the financial sector rose to US$12 billion due to significant investment in China's banking sector.

China's low labor costs had enabled the country to become a global production base, the report said. But as domestic capabilities increased China's FDI was likely to focus on higher, value-added production requiring increasingly skilled labor.

The report stated China's outbound investment totaled US$63.64 billion by the end of June. Chong told the briefing that Africa would be a major focus of China's outbound investment. The country's investment in Africa had reached US$6.27 billion by the end of September.

(China Daily October 17, 2006)