China recorded a 38.3-percent rise in foreign direct investment in February to total US$6.92 billion, the Ministry of Commerce said yesterday.
The growth in FDI dropped drastically from January's 110-percent jump but the investments indicated that China was still seeing larger-than-expected inflows of money. Last year, China's FDI grew 13.6 percent to US$74.8 billion. The figure jumped 75.1 percent to US$18.1 billion in the first two months of the year.
New foreign-funded firms fell 38.02 percent to 1,454, as investors focused on bigger and more capital-intensive projects, said Li Maoyu, an analyst at the Changjiang Securities.
"The global capital flow may concentrate more on emerging markets this year as the United States is likely to enter a recession,'' said Li. "However, China should be cautious about speculative money that are seeking to cash in on the stronger yuan.''
Yuan has appreciated more than 13 percent to 7.11 against the US dollar since the link with the greenback was scrapped in July 2005.
China's rapidly growing consumption also makes it an attractive market for investments, Li said.
In the first two months, China's retail sales gained 20.2 percent to 1.74 trillion yuan (US$245 billion).
Investment from US companies surged 43.7 percent although the number of projects dropped 32.4 percent last month. Funds from the European Union soared 109.8 percent while the project number fell 26.6 percent.
The rise in FDI is putting more pressure on the central government to spare no efforts in reining in excess liquidity in the market. Together with an 8.7-percent surge in consumer prices last month, the odds for China to further tighten its credit control are increasing, analysts said.
China's central bank raised interest rates six times in 2007 and has ordered lenders to set aside more funds as reserves on 11 occasions since last year.
Zhou Xiaochuan, governor of the central bank, said last week that there is room for China to raise interest rates and the yuan will be one of the weapons to fight inflation.
