China's foreign direct investment (FDI) increased over 10
percent year-on-year in the first four months of 2007 despite
concerns that higher corporate income tax rates might affect the
inflow.
China drew US$20.4 billion in FDI from January to April, up 10.2
percent from a year earlier, according to Ministry of Commerce
spokesman Wang Xinpei.
Foreign investment in the service sector is expected to maintain
robust growth 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.
"With five years (the grace period) elapsing since China entered
the World Trade Organization, the service industry will be further
opened up to foreign investors. New FDI will largely concentrate on
sectors such as transportation, computer services, distribution,
tourism, architecture and financial services," he said.
The FDI inflow grew rapidly till 2005, but has now entered a new
phase of steady rises, Shen said. But the inflow, he maintained,
will remain high this year.
He said some drop in FDI is not bad news because the investment
structure will be optimized in the process.
Since late last year, there have been rumors of the average
corporate income tax going up for foreign companies to 25 percent
from 15 - a measure finally passed by the National People's
Congress this year.
China is now encouraging 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 China.
In April alone, actual FDI reached US$4.47 billion, 5.5 percent
more than in the previous year.
The ministry approved 12,349 foreign-invested enterprises in the
past four months, down 2.29 percent from the previous year. It did
not disclose the amount of contracted investment of the FDI
agreements, as opposed to the realized ones.
For the whole of 2006, China drew a record US$63 billion in
non-financial FDI, up from US$60.3 billion in 2005 and US$60.6
billion in 2004.
The FDI figure released by the ministry excludes investments in
the financial sector.
(China Daily May 17, 2007)