According to statistics released yesterday by the Ministry of Commerce, actual foreign direct investment (FDI) reached US$8.319 billion in the first two months, with a 10.28 percent year-on-year growth.

Contracted FDI stood at US$19.136 billion in the two-month period, rising 34.54 percent over the same period last year.

The ministry approved the establishment of 6,025 new foreign-invested enterprises during the period, 11.74 percent higher than in the first two months of 2003.

The growth rates are much lower than the figures in the same period last year, when actual FDI grew by 52 percent and the contracted FDI registered a year-on-year growth of 58.85 percent.

But experts said the slowdown was to be expected.

"The growth rates are quite healthy and it shows China has maintained a good momentum to attract foreign investments," said Jin Bosheng, director of the FDI department of the Chinese Academy of International Trade and Economic Cooperation, a think-tank of the ministry.

He explained that since the bases in the same period of last year were large, a 10 percent growth in FDI would be a significant achievement.

On the other hand, compared with the actual annual growth in FDI of 1.44 percent in 2003, the growth in the first two months is also quite satisfactory, he added.

Wang Xiaoguang, an expert at the Academy of Macro-economic Research under the State Development and Reform Commission, pointed out that international investors shifted their focus from China to the United States due to the latter's economic pick-up.

He added that besides larger bases in 2003, worries about overheating in some sectors also made investors cautious about investing in China.

The Chinese Government has warned that overheating might take place in the real estate, steel and cement sectors and tried to control the fast increase of bank loans last year.

Despite the January-February slowdown compared with the same period last year, experts said prospects for the whole year remained good.

"If we can achieve an annual gross domestic product growth of 8.5 percent, international investors will have more confidence in China," said Wang Xiaoguang.

He said a trend is emerging that China's economic growth in the first quarter will slow down to a healthy rate, helping to build foreign investors' confidence in the Chinese economy.

He estimated the growth rate of actual FDI will remain at about 10 percent, but it will pick up in the second half of the year reaching 15-20 percent.

Song Hong, an economist at the Chinese Academy of Social Sciences, predicted the actual FDI will be US$60 billion, if the current healthy growth is maintained for the rest of the year.

(China Daily March 16, 2004)