Last year, China witnessed a surge in foreign investment, remaining a favoured destination for such investment.

In 2000, foreign capital pumped into China accounted for 3.4 percent of the total cross-border investment in the world. And the share was expected to exceed 4.2 percent last year.

Foreign-funded enterprises played an increasingly important role in the country's economic development by making an impressive contribution to China's growth of export and tax revenue, said the article.

In recent years, foreign investors have favoured China as their base of manufacturing rather than assembling. With this change, many foreign investors, in turn, shifted their orientation of investment.

More transnational enterprises invested in high-tech industries by introducing their parent enterprises' advanced technology and products into China, contributing to the progress of China's high-tech industries, and helping to narrow the gap on high technology between China and developed countries, said the article.

The business of foreign-funded enterprises has been extended from spare parts producing to complete product producing and related sectors. For example, Japan's Toshiba at first invested only in electronic spare parts production. Now, with more capital inflow, complete production lines for colour TV sets have been set up.

Increased foreign capital input is also funneled into product upgrading and technological innovation. For instance, automobile joint ventures have presented many new types of cars after pumping more capital into research and development (R&D).

Many giant enterprises increased their procurement in China to localize production. Motorola, for example, rolled over 12 billion yuan (US$1.45 billion) in procurement in China last year. Ericsson's mobile phone battery and its accessory battery charger are all made in China.

Since the mid-1990s, foreign enterprises have stepped up building R & D institutes in China. By the end of August, more than 100 independent R&D institutes were set up by large transnational enterprises, most of which have carried on business in China for more than five years and are hatching long-term investment plans. Those institutes mainly focus on industries of information, communication, biological pharmacy, refined chemicals and transportation.

These R&D actions are all operated in line with the demand of the Chinese market.

With Chinese people's income continuing to spiral up, China is expected to be a consumption base of high-tech products, as well as a manufacturing base. For example, the number of fixed and mobile phone users in China is the largest in the world, and the potential car market is enormous.

Increased investment and growth in manufacturing call on transnational enterprises to set up regional headquarters in China to centralize the allocation of funds, carry out R&D, and promote market sales, said the article.

(China Daily January 29, 2002)