For its first FDI report card of the year, China saw its foreign direct investment (FDI) leap US$5.18 billion in January, up 13.9 percent on a year earlier, with China receiving some US$5.18 billion in FDI last month, the Ministry of Commerce said yesterday.

"Domestic purchasing power is playing a bigger role in attracting foreign investment," said Tim Condon, an economist at ING Bank NV in Singapore. "But China also remains a very attractive destination for companies relocating plants."

Foreign investors remain on a lucrative hunt in China despite the country's unification of all corporate income taxes from both foreign-invested and domestic companies, a move set to remove foreign-funded businesses of favorable tax rates from 2008 onwards.

The move is part of the government's reposition from a previous desire for maximum investment to a sharper focus on quality investments. 

The Ministry expects the 2007 FDI to match last year's, but is hoping to increase both quality and efficiency. The total FDI was US$63 billion in 2006.

As it bolsters the growth of manufacturing sectors offering high added-value and services industries, the government is considering environmental impacts and has stopped approving foreign investors who pollute or show themselves to be inefficient.

FDI to the less-developed central and western parts China is also being promoted.

In the course of last month, the ministry approved 3,370 foreign-invested enterprises last month, up 10.71 percent year-on-year. The total contracted investment was not disclosed however pending the fulfillment of numerous agreements.

While Hong Kong, the Virgin Islands and South Korea were the top three sources, FDI from US companies have increased by close to a third since last year.

(China Daily February 15, 2007)