China says foreign direct investment jumps

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Foreign direct investment in China rose 14.3 percent year-on-year in the first five months of 2010, the government said on Saturday, in an announcement that could add to mounting concern over inflation.

Foreign companies invested US$38.9 billion in the world's third-largest economy from January through May, commerce ministry spokesman Yao Jian told reporters.

That marked an acceleration from the 11.3 percent growth logged from January to April and the 7.7 percent growth of the first quarter.

In May alone, foreign direct investment totaled $8.1 billion, a jump of 27.5 percent over the same month in 2009, Yao said.

The figures were released a day after the government said the consumer price index, the nation's main gauge of inflation, had surpassed an official target in May to rise a surprising 3.1 percent year-on-year.

The increase outpaced a 2.8 percent rise in April and overtook Beijing's target of 3.0 percent for the year, which analysts said could potentially increase pressure on policymakers to hike interest rates.

The money foreign firms put in the manufacturing sector fell by 3.85 percent on year in the first five months of the year and accounted for 47.3 percent of total overseas investment the country received in the period, he said.

Concerns are on the rise that manufacturers could lay off staff or move their operations to regions where labour costs less after a number of disputes in China that centered on demands for higher pay.

Operations at two vehicle assembly plants of Japan's number two auto maker Honda Motor in south China have been on and off in recent weeks due to strikes, and a labor dispute is still going on at a factory that makes car locks and key sets.

Taiwanese high tech firm Foxconn which counts Apple, Hewlett-Packard and Sony among its clients raised wages 67 percent for its hundreds of thousands of workers in China after 11 suicides, 10 of them in southern Shenzhen city.

Earlier this week, about 2,000 workers at the KOK Machinery factory in the city of Kunshan outside Shanghai walked off the assembly line, demanding better pay and an improved working environment, Chinese media reported earlier.

But Yao said creating jobs was the government's top priority at the current stage, adding that he was confident China would remain attractive to foreign investors as it had various advantages beyond cheap labor.

"Improving policy environment, growing domestic market potential"¦, expanding industrial supply chain, and increasing the well-educated labor force will provide good conditions for China to attract foreign investment in the future," he said.

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