The realized foreign direct investment (FDI) in China climbed over 13 percent in the first two months of this year.

 

The news comes amid concerns that the newly introduced unified corporate income tax rates might affect the FDI inflow.

 

China received some US$9.7 billion in FDI from January to February, up 13.04 percent from the previous year, the Ministry of Commerce said yesterday.

 

The continued rise in FDI marks the uptrend since the end of last year, after minor dips in the middle of 2006.

 

With a view to capitalise on the vast market of 1.3 billion people and low labor costs, "nearly every foreign investor wants a share of the China pie", said Hu Yanni, an analyst with China Securities Research of CITIC.

 

But she said the FDI growth rate is not expected to exceed 10 percent this year because of an already inflated base. FDI in China was US$63 billion in 2006.

 

Foreign companies will have to pay 25 percent corporate tax, up from the current 15 percent, according to the draft law on corporate income taxes, which is expected to be passed in this session of the National People's Congress and will come into effect from next year.

 

However, the government will continue to encourage foreign investment in the country's west.

 

China is also encouraging high value-added manufacturing sectors and services industries while halting approvals for foreign investments in high-pollution and low-efficiency ventures.

 

The ministry approved 5,716 foreign-invested enterprises in the past two months, up 11.29 percent from the previous year.

 

It did not disclose the amount of contracted investment the FDI agreements yet to be fulfilled, as opposed to the ones realized.

 

In the first two months of this year, Hong Kong invested US$2.95 billion to become the largest investor on the mainland. It was followed by the Virgin Islands and Japan. In this period, the US' actual FDI to China hit US$448 million, up 15.7 percent year-on-year.

 

(China Daily March 14, 2007)