China has been reforming its policies in an effort to discourage overseas investment in energy-intensive, polluting and resource-based ventures - the so-called smokestack industries.

Delivering a work report to the 1st session of the 11th National People's Congress (NPC) on Wednesday, Premier Wen Jiabao made known China's determination to end its position as a global center of such industries.

"We will limit or ban foreign investment in projects that are energy-intensive or highly polluting, limit or ban foreign investment in some areas of resource exploitation, and correct illegal practices for attracting foreign investment," said Wen. "We will expand the breadth and depth of China's openness."

The government's changing attitude toward overseas investment, which emphasizes energy conservation and environmental protection, is aimed at being rational and scientific.

Zhang Yansheng, chief of the Institute of Foreign Economics affiliated with the National Development and Reform Commission, said: "Given the size of the Chinese economy, I believe the international community will benefit from the country's policy adjustments toward overseas investment in terms of resources, environmental protection and the balance of global trade."

Under the revised edition of Guidance Catalogue for Overseas Investment Industries, promulgated by the government in December, overseas investors are being encouraged to enter fields such as recycling, clean production, renewable energy, environmental protection and efficient use of resources.

They are restricted or banned from entering energy-intensive, polluting sectors or certain certain fields of resource exploitation, and export tax rebates for 1,115 commodities in these sectors have been ended.

Zhang said that tougher rules didn't mean that overseas investment was unwelcome.

China has been one of the most successful nations in terms of foreign investment over the past three decades, with a paid-in amount of nearly US$74.77 billion last year.

Zhang discovered through his research that foreign investment raised total energy use in China, although it did improve energy efficiency.

The emphasis on statistics regarding the use of overseas investment in the past, however, produced negative results that couldn't be ignored. Some departments and many local governments made the amount of overseas investment into part of an official's work.

The blind pursuit of foreign funds led to many short-lived smokestack factories that turned out low-end goods.

A report released by the China Council for International Cooperation in Environment and Development in late February disclosed that the number of overseas investors investing in polluting industries accounted for about 30 percent of overseas-invested ventures in 1995 - and 84.19 percent in 2005.

Overseas investment in environmental protection comprised a meager 0.2 percent of the total, according to the report.