About 20 percent of all foreign direct investment (FDI) in developing countries over the past 10 years went to China and China received more than 100 billion U.S. dollars in FDI in 2008, according to a report by the World Bank.

The report, titled “Foreign Direct Investment – the China story,” said that in terms of share of China’s GDP and investment, FDI accounted for some 2.5 percent of GDP on average over the last five years. The challenge for China now is to attract the right kind of FDI as it strives to rebalance its economy, improve the environment and move up the value chain, according to the report.

Recent FDI strategies have taken a more selective approach, which aims to attract environmentally sustainable, energy efficient and technologically advanced industries. In line with its global economic rank, China is providing a level playing field for all firms, domestic and foreign alike, according to the report.

The World Bank Group recently published the “Investing Across Borders 2010″ report. The report is a new study comparing regulation of inbound FDI across four categories for 87 countries. According to the World Bank, China is on a list of countries that have the most restrictive rules regarding FDI.

According to statistics released by China’s Ministry of Commerce, the actual use of FDI in the first six months of this year was up almost 20 percent, with an increase of nearly 40 percent in terms of the actual use in the month of June, said Liu Yajun, an official with the Ministry of Commerce.

As stated in the report, in addition to assessing the legal and regulatory framework, it is well established that investors value the economic size of the host country, its domestic market, proximity to important foreign markets, the potential for innovation, the skill level of the workforce and the quality of government services.

From the host country’s point of view, the risk of negative results from foreign investments, such as environmental and social damage (especially if the poor are the ones affected) needs to be balanced with the opportunities that such investments can yield.

Corresponding to China’s shift of its development goal from an emphasis on GDP growth toward a more harmonious balanced development, China made a radical commitment to services liberalization in its accession to the WTO. This has triggered a shift of FDI to service industries.

By 2009, FDI in the service industries had increased threefold from 2000 levels, while manufacturing FDI in China increased 81 percent. The latest UNCTAD report on World Investment Perceptions lists China in first place among the top 15 investment locations.

People’s Daily