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January 6, 2010

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Home » Business » Economy

Caution urged on investment

CHINA will continue its efforts to attract foreign investment this year, and divert them to more dynamic sectors such as advanced manufacturing and modern services, a senior government official said yesterday.

But China should also safeguard national security in the process, avoiding too much reliance on foreign funds, adjusting its role in sensitive areas such as agriculture, and keeping checks on the inflow of speculative capital, deputy director of the National Development and Reform Commission Zhang Xiaoqiang said.

"China remains one of the most attractive destinations for foreign investment due to the country's stable political and social status, huge potential in the domestic market and its relatively comprehensive infrastructure construction," Zhang said. "Besides, the advantage in labor costs still exists."

Zhang said China will continue to offer preferential policies for foreign capital in industries such the high-tech sector, advanced manufacturing, modern services, new energy and energy conservation.

They are part of China's strategy to upgrade its economic structure, and also a bid to meet the demand of a new round of relocation by global industries. But China should become more aware of the risks and raise the quality of foreign investment, Zhang said.

The country should closely monitor the movement of speculative money, which may grow due to loose monetary policies in developed countries, a weakening United States dollar and China's rapid economic recovery.

China should also keep its independence in industries such as agriculture, finance and telecommunications - key components regarding national security.

China's foreign direct investment expanded at its fastest pace in 16 months at an annualized 31.97 percent in November. In the first 11 months of 2009, foreign investment dipped 9.9 percent from a year earlier to US$77.8 billion due to the recession.

China also encourages outbound investment and will actively participate in global competition for oil, natural gas and mineral resources to meet domestic demand, Zhang said.

Outbound investment increased 0.5 percent in the first three quarters of last year to US$32.8 billion. In the third quarter alone, the volume surged 190.4 percent from a year earlier to US$20.4 billion.


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