Foreign direct investment (FDI) into China in the first two months of this year grew by nearly 8 percent from a year ago, the Ministry of Commerce said yesterday. The figures show China continues to attract foreign investors.

FDI flowing into China from January to February totaled US$8.6 billion--up 7.8 percent year-on-year.

In the past two months the ministry have worked with 5,136 new foreign backed enterprises--down by more than 5 percent from last year. .

Hong Kong, the British Virgin Islands and South Korea topped China's major foreign investors.  .

The ministry did not give figures for contracted investment--deals already signed but not yet in place. These figures are regarded as an indicator of future investment trends.

China, despite its FDI fall in 2005, remains a sound investment location for overseas investors, said Gao Hong, a researcher with the Chinese Academy of Social Sciences.

China attracted US$60.3 billion in FDI last year down slightly from the record of US$60.6 billion posted in 2004.

"We have noticed from the figures published that the average value of each single investment has increased," Gao said.

The ministry expects that FDI levels into China will remain similar to last year.

But some experts predict that the total foreign investment coming into China may decline in the country's 11th Five-Year Outlines (2006-10).

The National People's Congress, China's legislator, is expected to discuss a revision of the tax law which would introduce a unified business tax rate this year. Currently foreign firms in China enjoy an income tax rate of 15 percent while domestic firms are taxed at 33 percent.

China might see a decline in FDI in the years to come but the country will play a more important role as an overseas investor, said Jiang Xiaojuan, a vice-director in the research office of the State Council.

Last year, China's outward investment surged to about US$6 billion from US$620 million in 2000.

In another development, China's trade surplus reportedly narrowed in February at the fastest pace since November 2004. The surplus fell to US$2.45 billion from US$9.49 billion in January, news agency Reuters reported. The decline in the country's trade surplus was attributed to an increase in imports. Imports jumped in February by 30 percent while exports gained 22 percent.

Last year China's trade surplus amounted to a record of US$102 billion causing deep concern among trading partners in particular the United States which saw its trade deficit with China widen to US$100 billion.

Some US politicians have even called for punitive tariffs on all China's exports to the United States.

(China Daily March 14, 2006)