Suzhou, long dubbed a paradise on earth for its famed ancient gardens, has turned out to be just as alluring to foreign investors.

The Jiangsu city tops the ranking of "China's 20 Most Attractive Cities for Foreign Investors," which was released yesterday. It is followed by Shanghai and Qingdao; and Beijing ranks seventh.

The Chinese Academy of Social Sciences (CASS) and China Business News evaluated about 290 Chinese cities in four months to arrive at the ranking.

Major criteria included the amount of foreign investment the city absorbed since 2003; the proportion of foreign investment in the city's total investment; and its average annual growth of foreign investment in the past three years.

Of the top 20, eight are from East China's coastal provinces and seven from South China, which shows that "eastern and southern regions are still the hot areas for foreign investors," said Jin Pei, deputy director of CASS' Institute of Industrial Economics.

However, cities in central and western China are becoming increasingly popular, as most cities that boast rapid growth in foreign investment are from the two areas, according to Jin.

"Our research shows that it's inevitable that multinational companies invest more in central and western areas where they can have even lower manufacturing costs," he said.

Nantong, Nanchang, Yangzhou, Chengdu and Changsha are the top five in terms of growth rate.

As for special economic zones, Suzhou Industrial Park, Shanghai Jinqiao Export Processing Zone and Xiamen Industrial Development Zone are the three most sought after.

Li Peiju, editor-in-chief of China Business News, said the ranking could serve as valuable reference  for international investors who have already entered, or plan to enter, China.

A previous CASS survey shows what multinational companies are concerned most about is not favourable taxation polices but administrative efficiency of the local government.

Jin said if China wants to maintain its position as a favoured destination for foreign investment, governments should make efforts to improve their efficiency.

Figures from the National Development and Reform Commission show that from 2001 to 2005, China absorbed US$286 billion in foreign direct investment, of which Suzhou took in US$20 billion.  

Last year, more than 25 million people were working at overseas-funded companies in China.

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