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Foreign direct investment in china hits records

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Foreign direct investment in China hits record

BEIJING, July 13 (Reuters) - China drew nearly $8 billion in foreign investment in June, one of the biggest hauls ever and up 14 percent from a year earlier, evidence that investors were unfazed by government steps to cool the economy.

The $7.97 billion in foreign direct investment topped the previous high of $7.66 billion set in June 2002, according to calculations based on official first-half data released on Tuesday.

"Basically the message is that the long-term investors and foreign multinationals have been little affected by the policy tightening measures," said HSBC economist Qu Hongbin.

"You could also read it as people are still pretty confident that the government is able to manage overheating."

Beijing fears that runaway domestic investment in some areas has stretched supplies of power and raw materials and fuelled inflationary pressure, threatening to turn the current economic boom into a bust.

But the government still welcomes foreign investors, whom it sees as a rich source of not only cash but of technical and management expertise that can strengthen domestic firms as well.

Foreign direct investment in China has tended to accelerate since the deadly SARS disease outbreak a year ago. It was 15.4 percent higher in May than a year earlier.

Companies from other countries are drawn to China by the country's vast pool of cheap labour and its fast-growing economy.

"The fundamentals that make China an attractive place for FDI have not really changed," Qu said.

Contracts for intended foreign investment, as distinct from investment actually made, were a whopping $15.5 billion in June, up about 21 percent from a year earlier.

In June, U.S. auto giant General Motors Corp. said it would invest $3 billion to double capacity in China by 2007, and Germany's Volkswagen A.G. said it would spend 740 million euros ($900 million) on two new engine plants and one new car factory.

China's Commerce Ministry said recently it expected foreign investment this year to roughly match or exceed the $53.5 billion reached in 2003.

Last year's FDI was up 1.4 percent from the previous year, slowed due to the SARS outbreak, which led to the delay or cancellation of some deals.

In the first half, China drew nearly $33.9 billion in foreign investment, up 12 percent from the year-earlier period, the ministry said on Tuesday.

Contracted investment, an indicator of future trends, was $72.7 billion in the first half, up 42.7 percent from a year earlier, it said.

Copyright Reuters Ltd. All rights reserved. The information contained In this news report may not be published, broadcast or otherwise distributed without the prior written authority of Reuters Ltd.

07/12/2004 23:55

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