Restrictions fail to halt FDI rise

    BEIJING, Jan. 21 -- Foreign direct investment in China has risen to 74.7 billion U.S. dollars in 2007 as restrictions on companies' spending failed to outweigh the attractions of low costs and the world's fastest-growing major economy.

    Total foreign investment, including financial investment in China, was 69.5 billion dollars in 2006, and the number, excluding financial investment, stood at 63 billion dollars, according to data from the Ministry of Commerce.

    Thirty years after opening up to investment from abroad, China has been steering spending toward less-developed regions and industries such as technology and services. Foreign investors are buying into an economy that the government says expanded as much as 11.5 percent last year.

    "China remains an attractive destination for foreign investment with low labor costs, and a well-developed manufacturing capacity," Hao Hongmei, a researcher at the Chinese Academy of International Trade and Economic Cooperation, an affiliate of the commerce ministry, told Bloomberg News.

    Ford Motor Co, the second-biggest United States-based auto maker, is expanding Chinese manufacturing operations that began in 2001.

    In guidelines effective from December 1, China said it was limiting foreign investment in "important mineral resources" and industries that pollute heavily and consume too many resources.

    "We strongly recommend foreign investment take an active part in the government's plan to revitalize the northeast rustbelt region and to develop central and west China's economy," Vice Premier Wu Yi said last year.

    Foreign companies will pay more tax as a unified 25-percent rate for overseas and local firms is phased in from this month. Investors in Chinese factories also face reduced export incentives as the government seeks to narrow the trade surplus and limit the growth of low-value manufacturing.

    China introduced an employment law on January 1 that adds open-ended work contracts and severance pay.

    The average urban wage in China rose 15 percent to 20,856 yuan (2,875 dollars) in 2006 from a year earlier, according to government data.

    (Source: Shanghai Daily)