Between 2003 and 2006, US$29.3 billion of foreign capital poured into manufacturing in the sectors of communications equipment, computers and electronics. But foreign IT giants are looking beyond China as a manufacturing base and setting up research and development centers in the country.

Foreign-invested companies have become part of the Chinese economy, and play the most active part in the country as it faces up to global competition, said Wang Zhile, director of the Multinational Enterprise Research Center under the Ministry of Commerce.

Foreign-invested companies contribute a third of China's industrial output, a fifth of the tax revenue and 20 million jobs.

With new regulations on mergers and acquisitions of Chinese businesses by foreign investors, the practice has become an important way to attract foreign investment and help domestic firms access advanced technologies and management expertise.

Branching out

Chinese companies have made remarkable progress over the past four years in overseas investment since the government began encouraging qualified firms to do so.

China's outward investment is a "win-win" strategy, as the capital flow not only creates jobs at the investment destination and boosts the local economy, but also helps Chinese firms to diversify the origin of their products and thus avoid trade conflicts, the NBS said.

By the end of 2006 there were 30,000 Chinese-funded companies in 160 countries and regions with an accumulated foreign investment of $75 billion.

Chen Lin, deputy director of the commerce ministry's foreign economic cooperation department, predicted China's outward investment will speed up as the country's economic growth remains steady and foreign investment is high.

"We expected the country's outward investment to reach $60 billion during the 11th Five-Year Plan period (2006-10). Now we believe the actual figure will be much higher than that," he said.