China regained its position as the largest foreign direct investment (FDI) recipient in both Asia and the developing world last year.

"FDI inflows to China reached US$47 billion in 2001, a 15 per cent rise over 2000. The momentum continued in the first half of this year, with inflows rising by 19 per cent over the same period of 2001," according to the World Investment Report 2002, released yesterday by the United Nations Conference on Trade and Development (UNCTAD).

China ranked sixth across the globe in terms of the total volume of FDI inflows, the report said.

FDI continues to play a prominent role in China's economy - foreign affiliates now account for 23 per cent of the total industrial value added - 18 per cent of tax revenues and 48 per cent of total exports, the report indicated.

"The FDI fever in China is partially prompted by the country's World Trade Organization (WTO) accession," said James Zhan, a senior economic affairs officer of the Division on Investment, Technology and Enterprise Development under the UNCTAD.

Responsible for drafting the Asia-Pacific part of the report, Zhan mainly attributed China's dramatic temptation to FDI, to the country's sound investment environment and enormous business potentials.

FDI flows to the developing economies of the Asia-Pacific region declined 24 per cent last year to US$102 billion, down from US$134 billion in 2000.

Much of the downturn was due to a 60 per cent drop in flows to Hong Kong, which had recorded massive inflows, US$62 billion, in 2000, said the report.

In global inflows, the share of the region's developing economies rose from 9 per cent in 2000 to nearly 14 per cent in 2001, but was still below 1993-94 levels.

Overall, prospects for FDI in the Asia-Pacific region remain "bright," said the report.

Over half of respondents in a recent survey considered those prospects to be "improved" or "significantly improved" over the next three to five years.

The report suggested China topped the list in Asia, followed by Indonesia and Thailand.

On the other hand, outward FDI from China increased dramatically, and Chinese firms have been expanding abroad rapidly.

"As of last year, the top 12 Chinese transnational corporations (TNCs), mainly State-owned enterprises (SOEs), controlled over US$30 billion in foreign assets - close to the entire outward stock of Latin America in the mid-1990s - with some 20,000 foreign employees and US$33 billion in foreign sales," said the report.

"Private enterprises are now following the SOEs abroad, although most of them are small and medium-sized TNCs. They now have investments in over 40 countries all around the world," the report said.

Outward FDI from the Taiwan Province of China, by contrast, fell 18 per cent last year, the report revealed.

"Much of this investment went to the Chinese mainland, and the nature of these transferred activities has changed over time, from labor-intensive in the 1980s to capital-intensive and high-technology in the late 1990s.

The report predicted that the trend is likely to continue, given the easing of restrictions on FDI from Taiwan into the mainland and the WTO accession of both economies.

(China Daily September 18, 2002)