Neighbours' interest in booming property sector and reinvestments from profitable projects help push inflow to US$54b, says OECD Foreign direct investment (FDI) into China hit a record high last year, helped along by strong investment from neighbouring countries showing greater interest in the mainland's property sector. In an annual report released in Paris on Thursday, the Organisation for Economic Co-operation and Development (OECD) said external investment in China last year was US$54.9 billion, an increase of almost US$8 billion. The report said a considerable amount of the money from neighbouring economies targeted the property market during the year. 'Another reason for the high and increasing FDI inflows is reinvested earnings,' the report said. 'Many of the past investment projects have proven highly profitable and investors have been in no hurry to repatriate their profits.' Official mainland data indicates the nation's foreign direct investment was US$60.6 billion last year. It plummeted 27 per cent year on year in April this year and was down by 22 per cent in May. Morgan Stanley Greater China economist Andy Xie said macroeconomic policies implemented to cool down economic sectors, particularly the real estate industry, had helped discourage foreign investment in the past two months. China Foreign Affairs University professor Ou Minggang said the phasing out of the mainland's 'easy entry' policy towards foreign investment was also among the many factors dampening investor enthusiasm in the country. 'China is changing its 'easy entry' policy towards foreign capital by gradually phasing out preferential treatment for foreign companies, increasing the environmental standards of invested projects and strengthening evaluation of the investment,' Professor Ou said. The latest figures suggest foreign investors are reassessing their financial options as the government tries to cool down the economy, the investment environment in other countries improves and authorities weigh up a proposal to end income tax breaks for foreign companies. The income tax rate levied on domestic enterprises is 33 per cent, while foreign-funded businesses pay just 15 per cent. Vice-Finance Minister Lou Jiwei said in mid-January that it was no longer appropriate to grant foreign-funded companies preferential treatment given that the mainland was putting World Trade Organisation reforms in place. The ministry has proposed a unified rate of 24 per cent and submitted a plan to the State Council for discussion in August. But disagreements between departments have delayed the move. The United States continued to be the most attractive destination for direct investment from other countries last year. The OECD report said the US attracted US$107 billion in inward investment, well up on the previous year's US$67 billion. Interest rate rises by the US Federal Reserve have also made America a more alluring target.