Foreign investment in mainland leaps 11.9pc

The flow of capital into the mainland economic powerhouse showed no sign of abating last month as foreign direct investment (FDI) leapt 11.9 per cent to about US$5 billion.

The increase brought the total for the first eight months of the year to US$41.95 billion, up 12.8 per cent, keeping pace with the 12.9 per cent growth recorded in the first seven months of the year, the Ministry of Commerce said yesterday.

Economists said the growth showed that many overseas investors were undaunted by unfavourable factors in the mainland, such as rising production costs, higher wages, appreciation of the yuan and concern about a slowdown in global consumption due to the US subprime lending crisis.

Manufacturing soaked up much of the foreign investment, they added.

'The growth is likely to remain modest for the rest of this year,' said Deutsche Bank chief economist Ma Jun. 'But the growth will slow in January as a new tax policy will come on stream.'

Foreign companies are paying corporate income taxes that average 15 per cent, while domestic companies are charged a 33 per cent tax rate. Both will have their tax rates unified to 25 per cent on January 1 as part of an overhaul of the country's tax system.