Foreign direct investment (FDI) increased nearly 12 percent
year-on-year in the first quarter to reach US$15.9 billion, the
Ministry of Commerce said yesterday.
It marked an upward trend after continuous monthly drops last
year, and allays fears that the new corporate income tax - which
unifies rates for domestic and foreign firms and takes effect next
year - would dampen the enthusiasm of foreign investors in
China.
Heated discussion on lifting the corporate tax paid by foreign
corporations to 25 percent from the current average of 15 percent
and lowering the rate from around 35 percent to 25 percent for
domestic enterprises led to declines in FDI, especially in the
latter half of last year.
Experts believe overseas companies were waiting until the
picture was clearer which it is now after the law was passed last
month.
"Nobody can resist the temptation of the China market, and the
momentum of FDI growth will continue," Gao Huiqing, senior
economist at the State Information Center, told China
Daily.
Meanwhile, foreign exchange reserves reached US$1.202 trillion
at the end of March, up 37.36 percent year on year, the country's
central bank said yesterday.
The reserves increased by US$135.7 billion in the first quarter,
compared with an increase of US$250 billion for the whole of last
year, the People's Bank of China said.
The rising trade surplus is a contributing factor but other
elements, such as hot money, or speculative capital inflows, may be
behind the expanding reserves, said Li Jian, a researcher with the
Chinese Academy of International Trade and Economic Cooperation
affiliated to the Ministry of Commerce.
The trade surplus for the first quarter was US$46.44 billion,
nearly double the figure for the same period last year, even though
it declined 38 percent year-on-year to US$6.87 billion in
March.
Jun Ma, an economist with Deutsche Bank in Hong Kong, said the
rising reserves will continue to exert pressure on the yuan to
appreciate.
The central bank also revealed yesterday that growth in M2 - the
broad measure of money supply which includes cash and all deposits
- edged down to 17.3 percent at the end of March from 17.8 percent
in February.
The M2 growth marked a significant decrease compared with the
peak of 19.2 percent in January, showing the central bank's
measures, such as raising the required reserve ratio for banks, are
working.
(China Daily April 13, 2007)