China attracts record foreign investment in 2010

Shenlong car plant in Wuhan, Hubei province, central China Foreign investment grew particularly quickly in China's less developed interior, the ministry said

China attracted a record level of inward investment in 2010, sharply recovering from the previous year.

The country attracted $106bn of foreign direct investment - which excludes investments in financial instruments such as shares - up 17.4% from 2009, according to the Ministry of Commerce.

That was enough to more than reverse the 2.3% fall seen during the previous year caused by the global recession.

Over a fifth of the money went into China's property sector.

The Chinese authorities have been trying - with limited success - to head off a perceived bubble in property prices.

Rural interior

"The improvement in the investment environment has become a new driving force of China's [foreign direct investment]," said Yao Jian, a ministry spokesman.

He said that investment was particularly strong in China's poorer and less developed interior and western regions, where the cost of labour is much lower.

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Chinese banks were offering loans to producers of raw materials at a time when it was hard for them to attract financing from elsewhere”

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Over half of the investment came from Hong Kong, while nearby countries such as Taiwan, Singapore, Japan and Korea were also major sources of capital.

As was the case in 2009, December proved particularly strong, seeing $14bn of inflows - a record for a single month.

Meanwhile, the ministry also reported a big rise in China's investment in the rest of the world.

Outward investment rose 36.3% in 2010 - although at $59bn, the level remains only slightly more than half of the total for inward investment into China.

Mergers and acquisitions accounted for about 40% of the total, as Chinese companies chose to buy up ready-made businesses as well as investing in new projects and start-ups, or providing loans.

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