According to sources from the central economic work conference held at the end of last year, President Hu urged various departments to give enough attention to the six-month straight drop of foreign direct investment. Various levels of related departments should further improve the investment environment by improving government services and investment policies.

Premier Wen Jiabao also highlighted the need to boost the volume of foreign direct investment in 2004 while mapping out economic tasks for 2004. He stressed that more effort should be devoted to direct FDI into western development and northeast China industrial base rejuvenation causes.

In the first five months of 2003, China’s FDI grew 48.15 percent. The average FDI growth in the first half of 2003 was 34.33 percent. The FDI growth for the first seven, eight and nine months was 26.83 percent, 18.42 percent and 11.85 percent respectively. And the average growth from January to October in 2003 plummeted to only 5.8 percent.

On a monthly basis, China registered negative FDI growth in the third quarter of 2003. FDI volume in July, August and September in 2003 fell by 18.8 percent, 28.3 percent and 28.8 percent from the same period in 2002. In October, the monthly FDI further registered a 36 percent drop from 2002.

Officials at the Ministry of Commerce believe that a big FDI base in 2002 and the impact of SARS should be credited to the slowdown of FDI growth.

But China’s magnetism to FDI is unlikely to fade or backfire since China’s investment potential doesn’t change. Foreign investors could easily find great business prospects in China such as the Olympic Games, the World Expo, western development and the rejuvenation of northeast China industrial bases. China is hopeful to absorb more FDI than ever, say commerce officials.

In the beginning of January, the State Council principally passed the investment mechanism reform draft, which had been discussed for over five years. The scheme will be released to the public once it completes the final revision process. According to experts, the new scheme has strengthened restriction on government behavior.

As a limelight of the reform draft, improving government investment management accounts for a big part in the draft. The new scheme stipulates that government should take a more scientific and open approach when making any investment decision. To be specific, it calls for three systems to administer the government investment decision-making process:

1.Consultancy, discussion and appraisal system

2.Experts discussion system for important projects

3.Public notice system for government investment projects

(China.org.cn by Alex Xu, January 17, 2004)