China received $74.7 billion in foreign direct investment in non-financial sectors last year, ahead of all developing countries for the 15th successive year.

 

The figure reflects a year-on-year increase of 13.59 percent, the Ministry of Commerce said yesterday.

 

Total foreign direct investment, including capital flows to the financial sector, hit $82.7 billion in 2007, up 13.8 percent from a year earlier.

 

"The growth is higher than my expectation," said Wang Zhile, director of the Multinational Enterprise Research Center affiliated to the Ministry of Commerce. "It shows China's role as a crucial link for multinationals' global manufacturing, purchases and research."

 

There could be some adverse influences on foreign investment in China this year.

 

Income tax rates for domestic and foreign companies have been unified at 25 percent from the beginning of 2008. Before this, domestic companies paid a 33 percent income tax while foreign companies, which benefited from tax waivers and incentives, would pay an average of 15 percent.

 

But foreign enterprises registered before the date of implementation will benefit from the favorable tax rates for another five years.

 

Foreign investors also have to pay more for labor and material costs, such as oil, plastics and steel, as well as face tighter policies on polluting and resource-intensive industries.

 

But experts believe China will continue to be a magnet for FDI as Beijing's policies on foreign investment and opening up will not falter.

 

FDI in non-financial sectors is expected to increase 4 to 6 percent year-on-year in 2008 to hit $69 to $72 billion, according to a report released by the center of forecasting science under the Chinese Academy of Sciences.

 

The report said FDI in the service sectors, including banking, insurance and retail, is expected to accelerate this year as China opens up these sectors to foreign investors further.

 

The ministry last year approved 37,888 foreign-invested enterprises in China, including in financial sectors, down 8.69 percent from a year ago.

 

Although the ministry did not give a breakdown of the countries from where the FDI originated, FDI from both the US and the 15 original members of the EU dropped in the first 11 months of last year.

 

(China Daily January 22, 2008)