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China’s FDI up 13% in 7 months

China’s realized foreign direct investment increased nearly 13% year-on-year from January to July, driven by rapid growth in the real estate, stock and forex markets.

The country received $36.93 billion in FDI in the first seven months of this year, up 12.92% from a year earlier, the Ministry of Commerce said yesterday. It approved 21,676 foreign enterprises in this period, down 4.81% from last year. Foreign investors are expected to set up more operations in China this year, in particular in the H2, to avail the last opportunity to enjoy favorable corporate income taxes, said Lu Jinyong, a researcher at the University of International Business and Economics. From next year, income tax rates for domestic and foreign companies will be unified at 25%. Domestic companies currently pay 33% income tax while foreign companies, which have tax waivers and incentives, pay an average of 15%. Foreign enterprises registered before the rate unification will be taxed at the favorable rates for another five years. The figures released by the ministry do not include investments in the financial sector, such as banking, insurance and securities.

The ministry also did not give the amount for contracted FDI agreements yet to be fulfilled, as opposed to the ones realized. Lu expects FDI in China’s non-financial sectors to exceed $70 billion this year, compared with $63 billion last year. “The total FDI to China is likely to hit $80 billion, a new record, this year but the figure may decline slightly next year when the corporate tax unification takes effect,” he said. The Ministry of Commerce noted investments from the United States increased over 5% in the first seven months while that from the European Union decreased by over 34%. In July alone, the government approved 2,993 foreign enterprises; actual FDI stood at $5.04 billion, an increase of 17.84% from a year ago. Past months have seen robust growth in foreign investment in several sectors. (