Foreign direct investment (FDI) in China increased by over 12 percent in the first half of 2007 from a year earlier, with more capital flowing into manufacturing, real estate and service sectors.

 

The Ministry of Commerce said yesterday the country drew US$31.9 billion in FDI from January to June, up 12.2 percent year-on-year. For June alone, foreign direct investment jumped 21.9 percent to US$6.6 billion.

 

Statistics from the ministry showed manufacturing, real estate and commercial service sectors were the major draws for foreign investors.

 

Sector-specific statistics for the first half are not yet available but manufacturing, real estate and commercial services account for 53 percent, 23.9 percent and 5.3 percent of the country's total FDI respectively, according to figures of the first five months this year.

 

Foreign investors' interest in China's real estate sector waned in June as the central government strengthened the regulations on foreign investment in the sector, said Lu Zhihua, with CB Richard Ellis, a real estate service company.

 

Foreign investment in the service sector is expected to maintain robust growth as the service industry will be further opened up to foreign investors while investment in manufacturing is likely to decrease, said Shen Danyang, a researcher with the Chinese Academy of International Trade and Economic Cooperation, a think tank under the Ministry of Commerce.

 

Foreign investors largely relied on "greenfield" investment while investing in China but the country has seen more and more mergers and acquisitions by foreign investors in the past months, which helped to ease the problem of land shortage, in particular in coastal areas.

 

Yearly FDI in China has remained flat at around US$60 billion in recent years. The Ministry of Commerce expects modest growth in FDI for all of 2007.

 

The ministry approved 18,683 foreign-invested enterprises in the past six months, down 5.4 percent from the previous year. It did not disclose the amount of contracted investment of the FDI agreements, as opposed to the realized ones.

 

The FDI figure released by the ministry excludes investments in the financial sector.

 

China is now encouraging investments in high value-added manufacturing sectors and service industries while turning down foreign investments in high-pollution and low-efficiency ventures. The government is also encouraging foreign investments in western and central China.

 

(China Daily July 13, 2007)