The Development Research Center under the State Council based its assessment on China's entry into the World Trade Organization, rapid economic growth, western development, political stability and the prospects for the 2008 Olympics.

More than US$50 billion foreign direct investment was expected to flow into China last year, with the country taking the United States' place as the world's largest recipient of foreign direct investments.

"This is a good starting point. Foreign investments flowing into China will make big breakthroughs in the next five years," said Long Guoqiang, a senior researcher with the center.

China will continue improvement of its infrastructure, with the country's low costs remaining an important factor in attracting foreign investments.

A major reason behind the big increase in China's foreign direct investment is that more transnational corporations are moving their manufacturing operations here, said Long.

China's WTO entry turned many potential foreign investors into actual investors, he said.

The Chinese market will also grow to support better business development. The improvement of government services, policy stability and legal transparency will also attract more foreign investment, said the senior researcher.

China's expected rapid national economic growth and the start of a new round of trade liberalization talks will also create new business opportunities for foreign investors, said Jin Baisheng, a senior researcher with the Chinese Academy of International Trade and Economic Co-operation, a think tank of the Ministry of Foreign Trade and Economic Cooperation (MOFTEC).

But experts cautioned against over-optimism of China's use of foreign direct investments.

Long said US$50 billion represents only a moderate growth from last year's US$47 billion and that China has become the world's largest recipient mainly because foreign direct investment in the United States dropped in the past year.

Foreign investments are unbalanced in the three industrial sectors, with primary industries accounting for a mere 3 percent of China's total foreign investments and tertiary industries making up 25 percent, according to official statistics.

"Channelling more foreign investments into agriculture and the service sector will be an important task for the MOFTEC in the new century," said Jin.

The 12 provinces, autonomous regions and municipality in the west make up only 5 percent of China's total foreign investments in terms of the accumulative amount.

Many investors still complain about China's investment environment and the Chinese Government has much work to do on issues such as the business environment, regional distribution and transformation of government function, said Long.

(China Daily January 2, 2003)