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FDI in China Grows After Decline
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Realized foreign direct investment (FDI) in China rose in October after annualized declines in the previous four months, the Ministry of Commerce said yesterday.


The amount grew nearly 16 percent to US$5.99 billion and 3,047 foreign-invested enterprises were approved.


The country attracted US$48.58 billion in FDI from January to October, which is up 0.34 percent from a year earlier, ministry spokesman Chong Quan told a news briefing.


During the same period, 33,068 foreign-invested ventures were approved. This is down 6.32 percent year on year. The ministry did not reveal figures for contracted FDI. Hong Kong ranked first among sources of FDI, followed by the British Virgin Islands and Japan.


Although the increase was slight compared with last year, the average value of each investment deal rose, said Gao Hong, a research fellow with the Chinese Academy of Social Sciences. He attributed that to the government paying more attention to the quality of overseas investment rather than the quantity.


The figures released by the ministry didn't include investment flows to the financial sector, which has become a major destination of FDI since last year.


"A lot of foreign money is coming into China's banking sector as the deadline at the year-end for the full opening of the banking sector draws near," Citigroup economist Huang Yiping said.


The National Development and Reform Commission, China's top economic planner, said last week the country welcomed foreign companies as strategic investors in commercial banks and state-owned insurers as long as the Chinese side retained a controlling stake.


The move is expected to attract more inflows to the financial services sector during the 11th Five-Year Plan (2006-10). The banking regulator is expected to publish revised administrative rules on foreign banks allowing them to deal with renminbi retail business. FDI in the sector jumped to US$12 billion last year compared with less than US$2 billion in 2004.


Chong Quan also touched on China's trade and economic relations with Vietnam, India and Pakistan with President Hu Jintao yesterday beginning a visit to the three countries.


Chong said he believed Chinese products and services would have easier access to Vietnam as the country had recently concluded negotiations for accession to the World Trade Organization. Bilateral trade between China and Vietnam reached US$8.2 billion in 2005 and Vietnam is one of the major overseas investment destinations of Chinese enterprises.


Trade between China and India is expected to reach US$20 billion this year. This is two years ahead of the target set by the two governments.


China is also likely to reach a free trade agreement with Pakistan in the near future, Chong said.


(China Daily November 16, 2006)

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