Foreign investment in China continued to surge in the first quarter of this year, according to the latest figures.

Realized foreign investment reached US$2.74 million during the first three months of the year, up 61.26 percent year-on-year, the Ministry of Commerce said on its website on Thursday. Foreign investment in March alone was US$9.28 billion, up 39.6 percent year-on-year.

Experts said the continuous increase in FDI reflects China is still attractive for foreign investors despite the tax increase for foreign enterprises, a policy put in place this year.

"It shows China remains an attractive market for multinationals" because of its large market, vast manufacturing capacity and relatively low costs, said Wang Zhile, director of the research center for transnational corporations under the Ministry of Commerce.

The number of newly established enterprises declined. From January to March, the government approved 6,949 foreign-invested enterprises, down 25.26 percent. "That is a good sign," said Wang. "It shows large enterprises are increasing their investment in some large projects."

Commerce Minister Chen Deming had earlier said the number of projects with an investment of over US$30 million for the first two months increased 2.5 times than the same period last year.

FDI inflows have surged since the country joined the World Trade Organization in 2001. But many had worried the corporate income tax law that took effect this year might hinder the flow.

Income tax rates for domestic and foreign companies have been unified at 25 percent from this year, compared with the previous 33 percent for domestic companies and 15 percent for foreign firms.

"The latest figures show the investment strategies of large enterprises were not influenced by these policy changes," said Wang.

Chen said during the annual session of the National People's Congress last month that China will encourage foreign investors to participate in reforming State enterprises through mergers and acquisitions. Chen also said the country will encourage more hi-tech enterprises and restrict projects in heavy energy-consuming sectors.

(China Daily April 11, 2008)