China received US$53.5 billion in foreign direct investment (FDI) in 2003, up from US$52.7 billion in 2003 and passing the United States to become the world's top investment destination. The United Nations Conference on Trade and Development (UNCTAD) released the information on Wednesday in its World Investment Report 2004.

The manufacturing sector remained the dominant factor that pulled investment into China, but a rise in investment in the services industry was in line with the global trend, UNCTAD said. The number of cross-border mergers and acquisitions increased from 107 in 2002 to 214 in the year.

Continuing a three-year downtrend, the global flow of FDI slid 18 percent year-on-year to US$560 billion in 2003, the lowest level since 1998.

With inflows of US$107 billion last year, Asia-Pacific consolidated its position as the top regional destination for FDI in the developing world. Services -- including finance, tourism, telecommunications and information technology -- formed a growing proportion of foreign direct investment stock in the region.

China has led all developing countries in FDI inflow for 11 years, said Vice Minister of Commerce Liao Xiaoqi at the press conference held for the report's launch on Wednesday.

Liao said foreign funded companies play an important role in China's economy, with exports, valued at US$438.4 billion last year, accounting for 55 percent of the country's total.

He ruled out worries that China's ongoing macroeconomic controls will have a negative influence on FDI, saying that the country would maintain its existing foreign investment policies.

At the end of August, there were 494,025 foreign-funded firms in China, with contracted foreign capital valued at US$1.0 trillion and actual foreign capital of US$545.3 billion, Liao said.

UNCTAD predicts that China's FDI inflow will grow to US$60 billion this year, owing to the country's rapid economic growth and regional cooperation.

Hu Jingyan, director of the Foreign Investment Administration of the Ministry of Commerce, would say only that this year's figure will be at least bigger than last year's.

In the first eight months of 2004, FDI inflows hit US$43 billion, up 18.8 percent from the same period last year.

France and the United States ranked second and the third in FDI inflow last year, while the US remained the world's largest investor.

China is moving ahead as a source of FDI as well, joining Malaysia, South Korea and Singapore.

UNCTAD's surveys indicate that global investment flows are likely to turn upward this year, boosted by faster economic growth and improved corporate profitability.

The World Investment Report has been published annually since 1991. The reports cover the latest trends in foreign direct investment around the world and provide an in-depth analysis of one selected topic related to foreign direct investment and development. This year's report focuses on the shift toward FDI in services.
 
(China Daily, China.org.cn September 23, 2004)