China remains one of the world's largest recipients of foreign direct investment, but the FDI inflow slowed last year as the country adjusts its strategies in drawing foreign capital, a UN report says.

According to the report, released yesterday, China is the third largest FDI recipient in the world after the US and the UK. The inflow amounted to US$69 billion in 2006, with a modest decline of 4 percent over the previous year, the first decrease in seven years.

The figure indicates China remains one of the most attractive destinations for foreign investors. But the profile of such investments has changed slightly as the country emphasizes efficiency over mere scale expansion.

China is now trying to attract more investment in hi-tech and environmentally friendly service industries, instead of the traditional labor-intensive manufacturing industry.

Liang Guoyong, an economic affairs officer from the United Nations Conference on Trade and Development, which has been publishing the world investment report annually since 1991, said the country still retains huge advantages in attracting foreign investment with its vast market and relatively low labor cost.

But China has readjusted its priorities. From next year, domestic and overseas enterprises will be charged income tax at the same rate, ensuring a level playing field for domestic players.

To further develop the western region, the government is also encouraging more foreign investment in those parts.

"We encourage foreign companies to participate in the reform of State-owned enterprises in the central and western regions through mergers and acquisitions," said Qiu Lixin, an official from the Ministry of Commerce.

While China still receives large amounts of foreign investment, it has also started to invest in other countries as Chinese enterprises get increasingly international.

Though direct investment is on the rise the world over, Liang said some countries now adopt a policy of discouraging foreign investment.

This is because the price of primary products and mineral resources such as coal and oil is increasing worldwide, and many countries in Latin America are tightening their policies on foreign investment. There is also increasing protectionism in some regions.

(China Daily October 17, 2007)