CHINA still retains its attraction as one of the most sought-after destinations for foreign investment. Although there was concern following a sharp drop in contracted foreign investment in the first six months, it is not being seen as a negative trend. 'In the first half of the year, contracted foreign investment slowed significantly, but this is not at all a cause for worry,' Jason W.L. Kwok, chief economist at Citibank, said. From January to June contracted foreign investment declined slightly more than 25 per cent to US$44 billion compared with the same period last year. While contracted foreign investment slowed, actual investment picked up more than 50 per cent to $14.7 billion, according to recent official data. Mr Kwok said foreign investment in China would continue on an upward trend. Investments were now going into priority areas, rather than real estate developments, according to senior Chinese officials. Nearly 40 per cent of foreign funds went into real estate developments last year. Recently, Jiao Sufen, head of the foreign investment administration at the Ministry of Foreign Trade, told the China Daily that foreign investments in the mainland were 'being re-configured in favour of basic industries, infrastructure and other key state sectors'. Ms Jiao said the fact that domestic joint venture partners could not match the investment commitments of foreign firms was another factor that led to an easing of the inflow of funds. On the other hand, the quality of projects had been improving and better technology was being transferred to China by overseas firms. Part of the slowdown in the flow of overseas investments has been attributed to strict controls implemented to discourage speculative real estate projects. Mr Kwok said there were several reasons that resulted in a diminished flow of funds into China. 'Last year, China attracted $123 billion in terms of contracted foreign investments. But, this year, several factors contributed to the slowdown in contracted foreign investments,' Mr Kwok said. 'One factor was the austerity programme. Another reason was that, at the beginning of the year, China implemented a series of economic reforms, including currency reforms and changes in the taxation system. 'A lot of foreign investors waited to evaluate the implications of these reforms. 'During the first half of the year, investments slowed considerably. But then just look at the investments actually utilised in the first half. The amount of investments utilised has increased. 'The trend for utilised and contracted investments is different. That shows foreign investors are still enthusiastic about China.' Last year's utilised investments amounted to about $37 billion. Over the past several months, China has been encouraging more investment in selected areas such as agriculture, port developments, highways and aviation. Meanwhile, China's investments overseas have been growing over the past decade and are estimated to increase further. Recent official figures show that over the past 15 years China's investments overseas have totalled $5.2 billion. The big investments it has made abroad includes a 40 per cent share held by China Metallurgical Import and Export Corporation in an Australian iron ore mine. In Fiji, for example, there are 11 Chinese-funded enterprises with a total investment of $5.4 million. China's investors are also a dominant force in Hong Kong. Latest figures show mainland enterprises have invested about $20 billion, surpassing Americans and the Japanese. Mainland investors are the second biggest group after the British. From 1989 up to this year, 54 Chinese-funded companies have been listed on the Stock Exchange of Hong Kong, according to Xinhua (the New China News Agency). Last year, nine state firms, known in Hong Kong as the China Nine, listed in Hong Kong after a landmark agreement initialled at a ceremony in the Great Hall of The People in Beijing. The China Nine issued 5.5 billion H shares valued at $1.47 billion.
